HispanicBusiness

A reform of the tax code that would have attracted foreign companies in the British oversea territory of Gibraltar was struck down Tuesday by the Court of Justice of the European Union.

"The proposed tax reform constitutes a scheme of state aid which (Britain) is not authorized to implement," the Luxembourg-based court said in a statement after it ruled on the matter.

The scheme linked corporate tax to the amount of land occupied and the number of people employed -- essentially freeing companies with no physical presence in Gibraltar from the obligation of paying any tax at all.

It also limited corporate taxes to 15 percent of profits and exempted nonprofitable companies from any tax obligations.

The European Commission rejected the tax scheme in 2004, but British and Gibraltar authorities successfully appealed to the E.U. Court of First Instance, which reversed the commission's findings in 2008.

Tuesday's ruling overturned that and confirmed the commission's original decision. The verdict also represented a victory for Spain, which had appealed against the 2008 ruling alongside the E.U. executive.